Gold rose on Friday following a sharp rebound from earlier lows, after mixed signals from the U.S. nonfarm payrolls report suggested that the Federal Reserve could be more cautious about drawing down its economic stimulus program.
Bullion still posted a near 2 percent loss for its biggest weekly drop in five weeks, weighed down by a dollar rally.
Gold initially fell to a two-week low at $1,280 an ounce as encouraging U.S. gross domestic product and factory activity data earlier in the week reduced the metal's appeal as an investment hedge.
It jumped about $30 or 2 percent from its session low after government data showed U.S. employers slowed their pace of hiring in July but the jobless rate fell anyway, easing fears that the U.S. central bank might imminently reduce its $85 billion monthly bond buyback stimulus.
The jobs data sparked a sharp decline in U.S. Treasury bond yields, seen as measures of short-term interest rates.
"Gold seems to be more sensitive to signs of tapering than any other assets. Certainly, the direction of interest rate is a very crucial thing for gold at this point," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors.
Spot gold was up 0.l percent at $1,309.80 an ounce, having earlier traded as low as $1,282.89.
Bullion posted a 1.8 percent weekly decline for its first weekly drop in four weeks.
U.S. gold futures for December delivery settled down 70 cents at $1,310.50 an ounce, with trading volume about 10 percent below its 30-day average, preliminary Reuters data showed.
Until Friday, the metal had ended lower in the last four days. Earlier in the week, the Fed offered no indication that it was preparing to reduce its monetary stimulus at its next policy meeting in September.
(Read more: July jobs report key to Fed action)